Commercial real estate delinquency rates reflect divergent risk profiles across property sectors. Office properties face unprecedented stress with CMBS delinquency rates reaching a record 11.8% in October 2025, while multifamily properties show delinquency rates of 7.1%. These figures highlight significant differences between property types and financing structures.
Office CMBS delinquency rates now exceed Financial Crisis levels, primarily due to remote work and corporate downsizing. Meanwhile, overall commercial property delinquencies show signs of stabilization in some segments, indicating selective market adjustment.
The data identifies which property types face the greatest pressure and how lenders and borrowers respond through loan modifications and extensions.
Key Takeaways
- Office properties experience record-high delinquency rates exceeding 11%, driven by remote work and reduced corporate space demand
- Commercial real estate markets show signs of adjustment, with some property types stabilizing in recent quarters
- Delinquency patterns vary significantly by property type and financing structure, creating both risks and opportunities for market participants
Current Commercial Real Estate Delinquency Rates
Commercial real estate delinquency rates have reached concerning levels across several property sectors, with office properties hitting record highs and multifamily properties deteriorating. The office CMBS delinquency rate now exceeds Financial Crisis levels, while overall trends show mixed signals of stabilization in some areas.
Recent Trends in Delinquency Rates
In 2025, divergent trends have emerged in commercial real estate delinquency rates. Overall delinquency rates for commercial properties decreased during the third quarter compared to the previous quarter.
This improvement conceals underlying stress in specific sectors. The Trepp CMBS delinquency rate decreased for the first time since February in September 2025, falling 6 basis points to 7.23 percent.
However, October data shows renewed deterioration in both office and multifamily properties, suggesting that third-quarter improvements may have been temporary.
CMBS loans and certain property types remain under stress, highlighting sectoral nuances even as aggregate numbers improved.
Sector Breakdown: Office, Multifamily, and Retail
Office Properties
Office property investments currently face unprecedented challenges. The office CMBS delinquency rate hit a record 11.8% in October, much worse than the Financial Crisis.
This level marks a sharp increase from just 1.8% in October 2022. The 10 percentage point rise over three years reflects fundamental shifts in office demand.
Multifamily Properties
Multifamily properties have posted their weakest performance in nearly a decade. The multifamily CMBS delinquency rate reached 7.1%, the highest since December 2015.
This deterioration is affecting rental apartment property mortgages across markets, with stress from both operational challenges and refinancing difficulties.
Comparison to Historical Highs
Current office delinquency rates exceed Financial Crisis peaks by over one percentage point. The 11.8% rate marks the worst performance on record for office CMBS.
Office properties maintained relatively stable delinquency rates below 2% through October 2022, highlighting the scale of recent change.
The multifamily sector’s 7.1% delinquency rate matches conditions last seen during the 2015 Stuyvesant Town crisis, which required a $3 billion loan resolution through property sale.
Recent Developments in Major U.S. Markets
Pacific Northwest
Seattle faces significant distress. The $304 million Bravern Office Commons mortgage in Bellevue became delinquent after Microsoft’s departure left the 750,000-square-foot complex vacant.
New York Metropolitan Area
Long Island City is experiencing challenges. The $300 million mortgage on The Factory became delinquent due to maturity default, with occupancy dropping to 73%.
Receivers are experiencing increased activity as office foreclosures stack up across major metropolitan areas. This shift is impacting distressed property management.
Long Island City’s availability rate sits near 27%, significantly higher than Manhattan’s 17.5% rate.
Key Drivers and Impact of Delinquency Rates
Three primary forces shape commercial real estate delinquency rates: rising interest rates, loan maturities, and broader economic conditions. These factors directly influence borrower payment capacity.
Effect of Interest Rates on Delinquencies
Interest rate increases raise borrowing costs and reduce property valuations. When rates rise, variable-rate loans immediately require higher payments, straining cash flows.
Higher rates compress capitalization rates, reducing property values and creating negative equity situations. This dynamic makes refinancing more difficult as loan-to-value ratios worsen.
Key Rate Impact Areas:
- Debt Service Coverage – Monthly payments increase on floating rate loans
- Property Valuations – Higher cap rates reduce asset values
- Refinancing Capacity – Lower values limit new loan amounts
Properties acquired with aggressive leverage during low-rate periods now face the greatest stress. Hotels and retail properties with variable-rate financing experience particularly acute pressure from rate increases.
The Federal Reserve’s monetary policy directly drives these dynamics. Rate hikes intended to combat inflation create immediate challenges for leveraged commercial properties.
Loan Maturities and Refinancing Challenges
Commercial real estate loans typically mature every 5-10 years, requiring refinancing regardless of market conditions. The ability to secure new financing depends on current property performance and lending standards.
Banks have tightened lending criteria, requiring higher debt service coverage ratios and lower loan-to-value ratios. This shift creates gaps between maturing loan amounts and new financing availability.
Refinancing Obstacles:
- Reduced property income from tenant losses
- Stricter lender underwriting standards
- Higher interest rates on replacement debt
- Increased equity requirements
Underfunded capital expenditures are driving loan delinquencies in the US hotel sector, making sponsor refinancing more difficult. Properties requiring significant capital improvements face additional financing hurdles.
The “maturity wall” refers to billions in loans requiring refinancing over the next several years. Properties that cannot secure replacement financing risk default.
Economic and Capital Markets Conditions
Economic downturns reduce tenant demand and rental income, directly impacting a property’s ability to service debt. Recession fears and consumer weakness concerns most severely affect retail and hospitality properties.
Capital markets volatility restricts both debt and equity availability for commercial real estate. When investors reallocate to safer assets, commercial property financing becomes scarce and expensive.
Economic Impact Factors:
- Employment Levels – Job losses reduce office and retail demand
- Consumer Spending – Retail property performance directly correlates
- Business Investment – Influences industrial and office space needs
Regional economic variations create geographic pockets of higher delinquency rates. Markets dependent on specific industries face concentrated risks during sector downturns.
Banks face macro headwinds and disruption in 2026, which affects commercial lending appetite. Tighter credit conditions raise delinquency risks across all property types.
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